By Felipe Calderón, Global Commission on the Economy and Climate
Over the next fifteen years, the world needs to invest more in new infrastructure and upgrades than everything that exists today. This means we have a crucial window of opportunity to build it right, reflecting the new international priorities of the Sustainable Development Goals and the Paris Climate Agreement.
If we continue on our current high-carbon economic model, the world will need to invest more than $90tn in infrastructure. But it won’t cost much more to build our energy, transport, water, and telecommunications systems in a low-carbon way. Making our infrastructure cleaner and more sustainable could add as little as 5 per cent to upfront costs, which could be fully offset by lower operating costs. It would also make our economy cleaner, more efficient, and more productive. Plus, it would reduce the enormous costs of adapting to climate change. Read more
Matthew Blake, World Economic Forum and Gloria M. Grandolini, World Bank
Maria owns a tiendita, a small local shop on a side of the road in Medellin, Colombia, where she sells various items, including local soft drinks. But some potential customers are unable to buy anything at this tiendita — Maria’s shop is a cash-only operation. This scenario is not unique to this store: it demonstrates the omnipresent role cash has across the globe.
We estimate that in 2015, global cash and cheque payments among micro, small, and medium-sized retailers (MSMRs) stood at $19tn, compared to total payments to MSMRs – including those from various types of card – of $34tn. The majority of these cash transactions happen in emerging markets.
This first estimate of the size of the cash-based economy reveals the prevalence of cash in the global economy and suggests the size of the opportunity for electronic payments, which include swiping a card or tapping a smartphone. To put $19tn into context, it is larger than the GDP of the United States. Read more
By Asli Aydintasbas, European Council on Foreign Relations
To put it mildly, “Europe doesn’t know what to do with Turkey”. Always difficult, even torturous, the relationship between the European Union and Turkey has hit new highs and new lows in the last year.
There was the refugee deal, the summits and photo-ops of a type that had been absent for almost six years. There were steps toward visa liberalisation and the opening of frozen accession chapters.
But there were also threats and accusations. In Britain, Prime Minister David Cameron, in an effort to convince British voters to stay in the EU, had to pledge that Turkey would not become an EU member until the year 3000. Meanwhile, in Turkey, President Recep Tayyip Erdogan has made it a part of his routine stump speech to accuse Europe of supporting terrorism. Read more
The European, regional and global economic and political spillovers from the Middle East-Africa refugee crisis continue to defy lasting solutions, particularly in financing the absorption and resettlement of displaced millions where immediate costs reach billions of dollars.
The main UN refugee agency was chronically underfunded before the outbreak of the Syrian civil war and the Islamic State menace, which have caused additional lost output of $35bn in frontline countries according to development agency estimates. Read more
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It is sad how anti-Turkish rhetoric and jingoism are so easily flowing off British and other western politicians’ tongues these days, with Turkey seemingly appearing as the whipping boy of Europe. So it is ironic how Brits and many continental Europeans are quite happy to go in great numbers to Turkey every year, to enjoy Turkey’s great hospitality and the common history of European and Asian civilisations in great cities such as Istanbul.
They also tend to forget that Turkey helped to defend Europe against the threat of Communism as a loyal Nato member for more than 50 years and is now standing in the front line, insulating Europe from the instability and terrorist threat emanating from the Middle East. Read more
M-Pesa, the phenomenally successful Kenyan mobile money platform, has created excitement from all corners of the globe. Kenyans paying utility bills and buying goods in their local store are doing so with their phones, not with cash or credit cards. The country has become a leader in mobile money innovation.
Despite their efforts, however, other countries seeking to skip over the problems with cash and brick and mortar banking have been unable to match Kenya’s success. Understanding the unique convergence of forces that enabled M-Pesa’s rise provides critical insight into how other countries can establish a scaled mobile money infrastructure. Read more
By Sebastian Heilmann, Mercator Institute for China Studies
A wave of investment from China is breaking across Europe. Chinese takeovers of technological leaders have raised fears of a sell-out of our economies’ competitive advantage. In Germany, the Chinese Midea group’s offer to buy a controlling stake in the Bavarian robotics manufacturer Kuka has triggered fierce resistance.
Midea is the wrong target for the current backlash. But the debate over how to deal with Chinese investors is overdue. China’s state-guided outbound industrial and technology policies, aimed at technological leapfrogging through acquisitions, pose a formidable challenge to national investment regimes and EU competition policy. Read more
By Chandran Nair, Global Institute for Tomorrow
In April this year, Kenya’s President, Uhuru Kenyatta, burned over 105 tonnes of elephant ivory to protest the continued poaching of elephants. The Associated Press quoted President Kenyatta as saying that “…for us ivory is worthless unless it is on our elephants.”
At the same time, he hosted the “Giants Club” Summit, a meeting of African leaders to bolster the protection of elephants. The ivory burn — the largest in history — is a reminder that conservation is not just the purview of activists in the West, but also something that is dear to the hearts of many governments and people in the developing world. It should also be noted that some African commentators have been critical of this action arguing that in the final analysis it still panders to Western arguments about how to put an end to poaching. Read more
While China’s rapidly rising debt incites worries among many, China’s leadership seems so determined to meet overly ambitious GDP growth targets that leverage is set to continue to increase steadily. The government targets credit growth of 16 per cent this year, once changes in local government financing are taken into account, and credit expansion so far this year has broadly been in line with that target. Read more
Every country is touchy about some topics, especially when raised by a foreigner. Living in China for almost seven years now, and having been a student of the place for the last forty, I thought I knew the hot buttons not to press. Apparently not.
The topic at hand: high-tech innovation in the People’s Republic of China and why it seems to lag so far behind that of neighboring Taiwan. The current issue of one of China’s leading business publications, Caijing Magazine, published a Chinese-language article I wrote together with China First Capital’s COO, Dr. Yansong Wang, about Taiwan’s outstanding optical lens company Largan Precision. Read more
China continues to dominate discussions about the health of the world economy. Many are concerned about the country’s slowing growth and its ability to manage the difficult transition from a controlled economy dominated by manufacturing to a more open economy with greater reliance on domestic consumption. Some policy decisions last year also scared the market.
While the risks are many and real, they are manageable and well-understood by China’s policy makers. This is not the time to sell China short. Read more
As the former minister of telecommunications in the Lebanese government, no one knows better than I that Lebanon faces intense pressures. The terrible human toll from Syria’s five-year civil war has at times threatened to overwhelm our small country. The influx of refugees is on a scale with which few countries could cope. One million Syrian asylum-seekers were received last year by the entire European Union, with a population of 500m. This is fewer than the number of Syrians accepted by Lebanon alone, with a population of just 5m.
Lebanon successfully braved the 2007-08 economic crisis, with stunning growth of around 8.5 per cent. Prudent financial regulation – including banning subprime lending – protected it from the worst of the storms. Now the fallout from its regional neighbours has once again put a strain on the economy. Read more
Last month’s release of Ukrainian air force pilot Nadia Savchenko after 709 days in illegal Russian captivity came on the same day a group of us were returning from the front line of Ukraine’s Anti-Terrorist Operation (ATO) to Kiev. During the longer than usual train journey we compared notes about why Russian President Vladimir Putin had taken this step, what he hoped to achieve and how Savchenko would impact upon Ukrainian domestic politics.
Putin was not showing mercy. The day after Savchenko was released, a Russian court sentenced Ukrainians Mykola Karpyuk and Stanislav Klykhto to 22 and a half and 20 years respectively on bogus charges of fighting alongside Chechen separatists. And this by a country that has been arming separatists in eastern Ukraine for three years. Another 28 Ukrainian and Crimean Tatar political prisoners are incarcerated in Russian jails.
Instead, Putin had two goals in releasing Savchenko. Read more
In a world where financial transactions and capital flows move in milliseconds, getting the right information about the state of a country’s economy is critically important. Unfortunately, the standard and still most reliable measure of the health of an economy, gross domestic product (GDP), has not kept up with the speed of financial markets. This puts emerging market countries at risk from financial gyrations, regardless of the underlying fundamentals of their economies.
Take for example Indonesia, one of the largest and most influential emerging market economies. Its GDP data is reported quarterly with about five weeks’ delay. This means that economic activity that takes place in January is not reported until the first week of May. While Indonesia is no outlier in its delay, it is still late for a real-time assessment of the strength of economic activity. Read more
Speculation is rife that Amazon is soon to establish itself as a global shipping and logistics expert, in a move coined internally as project ‘Dragon Boat’.
While this bold strategy has the potential to significantly increase margins and position Amazon as Chinese businesses’ gateway to the West, a considered and phased implementation is essential if the firm is to gain share of the cross-border e-commerce market from industry leader Alibaba. Read more
Since Hugo Chávez rose to power in February 1999, the Venezuelan government has been described by all manner of creative terms: competitive authoritarianism, illiberal democracy, hybrid regime and others.
Behind this semantic proliferation there has always been the notion that, despite evident authoritarian tendencies, the chavista regime never quite eradicated the democratic space. While independent media and journalists were harassed, they never disappeared. While elections were deeply biased, they took place regularly and on schedule. The opposition was always allowed to contend, votes were counted fairly and, on rare occasions, chavismo would lose. The government’s exercise of power was questionable, if not abusive, but the democratic origin of that power was difficult to refute. Venezuela was by no means a liberal democracy, but it was not a dictatorship; Chávez was no Lincoln, but he was also no Castro. Read more
Gabriel Zucman, author of The Hidden Wealth of Nations, estimates that 8 per cent of global wealth, or $7.6tn, is deposited in jurisdictions commonly known as tax havens. This includes the financial assets of individuals and companies who seek not to pay tax, or pay less tax, in their home countries. James Henry, an economist, lawyer and investigative journalist, estimates the value of unreported financial assets at between $21tn and $32tn.
In a democratic social contract, the financing of states requires every citizen to pay taxes according to their ability to do so. So it is necessary to curb the use of artificial mechanisms to avoid due taxes. One such mechanisms is “aggressive tax planning”, which explores gaps between different national tax laws and embraces legal and accounting manoeuvres for profit or asset shifting towards jurisdictions with favourable taxation and little tax transparency. Certain jurisdictions allow the concealment of the beneficial owner of profits and incomes, undermining the actions of tax authorities. Read more
Iran’s new approach to building energy allies is being revealed as the former powerhouse staggers back onto the global stage. The lifting of sanctions in January has given the country a new lease of life. Tehran’s ability to adapt will prove vital, as today’s market is more competitive than the one it reluctantly stepped back from more than a decade ago.
Tehran remains confident that it can continue to build on its current 3.7m barrels a day (b/d) of oil production, which already represents a rise of half a million b/d since February. This means the country is already close to its target of 4m b/d and Tehran has said it aims to export 2.2m b/d by the end of the summer. The country’s strategy to regain superiority has started well, although some of this spike in volume may be a case of Iran emptying its full storage capacity. Read more
By Ken Wong, Eastspring Investments
There is an even chance that, this summer, China’s A-shares will be included for the first time in a key emerging market investment index operated by MSCI, the index provider. If it happens, it will be a welcome development, for the simple reason that it will make the benchmark a more accurate reflection of the emerging market corporate universe.
While the immediate impact of inclusion would be quite small, the longer-run potential for A-shares – which are the stocks of companies listed inside mainland China – to grow in importance within the index is enormous.
Two obstacles to inclusion have been largely removed – reforms to a quota system on investment inflows from abroad and a shortening of the delay in repatriating capital out of China. Read more
We are facing a growing and menacing threat posed by pandemics. Recent years have witnessed SARS, bird flu, MERS, Ebola and now the Zika virus. With each new discovery, our response is bewilderingly clumsy, and we seem to be no more equipped to respond than before. In many ways, we tie our own noose. History is littered with examples of action performed too little, too late.
Increasing population density and transnational travel of people and commodities increase the risk of communicable disease. As the threat of pandemics is becoming more real, it is paramount to create robust systems at the international, national and local levels to cope with such outbreaks. A recent global health commission estimated the potential annual economic losses from pandemics to be $60bn. Despite this ominous threat, international efforts to mitigate the risks are woefully inadequate. Read more